'Remarkable' surge in auto insurance costs fans US inflation
(Reuters) — Even as U.S. inflation has eased in the last year, an unusual culprit has emerged in recent months as a surprise force in preventing consumer prices from falling even further: auto insurance.
Consumer prices in December overall rose 3.4% from a year earlier, the Labor Department said on Thursday in the release of the monthly Consumer Price Index, more than the 3.2% economists polled by Reuters had expected and up from 3.1% in November.
Several familiar categories accounted for much of the overshoot, with stubbornly high shelter costs in particular accounting for close to two-thirds of the increase. But the highest annual increase for car insurance in nearly half a century made a notable upward contribution that may not be fading soon.
«The behavior of the MVI (motor vehicle insurance) component of the CPI has truly been remarkable, and I don’t see any evidence of near-term relief,» Tom Simons, U.S. economist at Jefferies, said in an email.
Motor vehicle insurance premiums skyrocketed by 20.3% in December from a year earlier, the largest increase since the mid-1970s, the government data showed.
Premiums have risen persistently all year on a monthly basis, too, climbing 1.5% last month. That is roughly on par with the average monthly increase over the last year, a rate that exceeds all monthly increases prior to the pandemic.
What's more, auto insurance — an expense category that has rarely registered as a hefty influence in overall inflation — accounted for 15% of headline price increases over the final quarter of 2023.
'STICKY STUFF'
Simons said several factors are adding to the rising premiums, such as increasing costs for the labor and parts to repair damaged vehicles, and the overall rise in vehicle
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